The Canadian Investor - Two Resilient Canadian Stocks in a Tough Trade Environment

Episode Date: July 17, 2025

In this episode of the Canadian Investor Podcast, we break down Canada’s latest CPI report, which shows inflation ticking up slightly to 1.9% and core inflation remaining sticky at 3%. We talk about how this may impact the Bank of Canada’s upcoming interest rate decision.Then, we dive into a strong quarter from Aritzia, where U.S. sales are booming and margins are improving despite tariff risks. On the flip side, MTY Food Group continues to struggle with soft same-store sales and a shrinking store count—raising the question of whether this is a cheap stock or a value trap.We also look at Richelieu Hardware’s steady performance, Delta Airlines’ financial spin zone, and the impact of tariff talk on both businesses and investor sentiment.  Tickers of stocks discussed: ATZ.TO, RCH.TO, DAL, MTY.TO  Get your TSX Meetup tickets here! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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that it's a business. Just my reminder to people who own safe Google's, don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian Investor Podcast.

I'm here with Dan Kent. We are back for a regular episode of our news and earnings. Actually just back from Calgary, I met Dan for the first time. So it was a really fun event. We had, I don't know how many people, but probably around 150 or so people that showed up to the event, right? Yeah, there was a lot of people there. It was pretty fun. It was hot. many people but probably around 150 or so people that showed up to the event, right? Yeah, there was a lot of people there. It was pretty fun. It was hot. Like probably one of the hottest days of the year. We had to cut the discussion portion just because we were sitting

on that astroturf. Oh my god, it was like 40 degrees there. But yeah, yeah, it was really fun to talk to a lot of people. Yeah, think the spot was Canadian Brew House, right? If I remember correctly. Yeah, yeah. Yeah, by the university. Yeah, exactly. So, thank you to those working there. They made the event really fun, really great for everyone that attended.

Like you said, it was really hot but thankfully we had some shade and some spot and then the sun but yeah, the Q&A, I think we took like four or five questions and we're all looking at each other like sweating profusely and say okay one more question because we're about to pass out but also wanted to give a big thank you to our two sponsored the sponsor the event so Sherwin Williams the high quality paint so for they were a really good sponsor they had some people there and they were a big reason that we were able to do the event and also live.rent another of the sponsors for the event so live is Canada's safest rental platform so if you're renting you're looking to to find somewhere definitely recommend seeing their website and looking at it. Now we'll start with the the actual episode so the good stuff now that the the housekeeping is done. Canadian CPI

Dan. So it just came out this morning. I know you had the chance. I had some meetings early this morning so I only had a chance to look at it quickly but you want to go over and just let us know exactly how it's looking in terms of inflation right now. Yeah I kind of of did this, you know, quickly this morning. I didn't have all that deep of a look, but on a headline basis, 1.9% so that's up 20 basis points from last month. So it was 1.7% in May, but core inflation remains pretty high. I think it was in the 3% range.

CPI trim is high as well. So, you know, the headline number is low, but I think things was in the 3% range CPI trim is high as well. So you know, the headline number is low, but I think things like food shelter all that is kind of driving up core inflation, which is is probably going to make the Bank of Canada a little hesitant in terms of cutting rates. Statscan kind of stated the month over month bump. So from May to June was because of gas prices. So gas prices are still lower year over year, but they're not as low as they were last month. So, so they said that kind of attributed to most of the bump. Everything else looks to be relatively steady, but it's still kind of high, which is, you know, the issue they're kind of faced

with right now. Food fell by 50 basis points, but it's still at 2.9%. Shelter was pretty steady at 2.9%. It was 3% last month. Vehicles are becoming a bit of an issue right now so 4.1% year-over-year increase in vehicles. I believe this combines new and used so that increased from 3.2% in May. Used vehicles had their first year over year increase in nearly 18 months. When we look to new vehicles, they increased by 5.2%. And I would imagine this as people just kind of rushing out to buy vehicles because of the risks of tariffs. I mean, I'm in this spot as well. I need a new vehicle, obviously, you know, expecting twins. When we were expecting one, we have a Ford Escape, we thought it would cut it. But

with two, I've had to kind of go out and kind of look at an SUV. And I don't really need one right now, but there's kind of a added pressure there just to get it done right now relative to waiting until October and November. And I mean, prices, I can't even believe I haven't had to shop for a vehicle for a very long time Yeah, I cannot believe the cost like it makes me want to cry So yeah, I mean I remember looking couple years ago. We bought our second car and It surprised me. It was high although the prices were starting to level off from the pandemic highs

So we were kind of lucky. We bought our vehicle used about five, I think it was 2021, right before prices started to increase. And the second one we bought it as prices were starting to cool off a little bit, but nonetheless, they were definitely higher. And that's what you're seeing, right? When the cost of new vehicles goes up or inventory is tied, people will shift to the used market especially if they can't afford a new vehicle then they go to the used market and then that extra demand pushes prices up so I'm not surprised hopefully able to find something pretty decent and not too old at a reasonable price. Yeah the other

thing I'm noticing too so we have kind of we're looking at a private vehicle and obviously you want to get it inspected before you buy it and to get into a mechanic. And I think this is an element of the new vehicle prices as well as mechanics are booking out like some of them into August. And I think it's because a lot of people instead of, you know, normally when prices were reasonable, they might go out, get a new vehicle or, you know, you know, consider trading one in. But now that they're so high, I think like repairs are are kind of becoming more feasible than, you know, going out and dishing out money for new vehicles. So just even trying to get a vehicle into a mechanic is just it's crazy. But in terms of of like rates, the rate, you know, the odds of a rate cut aren't zero, but I mean, I'd be

pretty shocked if they cut. So back when they reported CPI last month, I believe they were saying there was like a 25% chance of a cut in their next meeting. I'm not exactly sure when their next meeting is. It's got to be pretty soon. Yeah. I think it's end of July. I think it's in a week or two.

So after this print, they narrowed it down to 10% now. So I mean, they're pretty much saying there's not no chance of a cut but there's very minimal and I mean I don't blame them with you know Core CPI you know sticking to that 3% range. No exactly and one thing I don't think you mentioned is the services portion so that remains pretty, it's always kind of remains sticky it's still at 3% the over a year 0.1 when we're looking compared to May. And like you said, I think the biggest impact will be the core, which is looking pretty sticky. So it's been around 3% whether you're looking at the CPI median, which looks at the median

number and takes that number in terms of that increase or CPI median, which looks at the median number and takes that number in terms of that increase, or CPI trim that essentially just removes the volatile elements and those two have been really sticky around 3% and that is at the top of the range of the Bank of Canada because we do talk or they will talk a lot about that 2% but the 2% is actually a range that they want to be from 1% to 3%. So they always want to be within that range and they're starting to be on the upper end for Core CPI. So I would tend to agree with you and the markets obviously as well. I think around 5% to 10% chance of a cut. So it's very, very unlikely

I think at this point for the next meeting at least. Yeah, and I think they had unemployment fall as well. I think it was around 7% or whatever and it went down to 6.9% so yeah I don't see them cutting. They kind of said you know there's still a chance for potential cuts like later on in 2025 but they don't expect one in the next meeting at all. Okay well no that's a good overview given that we only had a little bit of time to review the data. Summer always gets extra busy. Weekends at the lake, trips out to Canada's East Coast, vacations with the family, chasing a bit of sunshine somewhere new.

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shares in ETFs. It's simple, powerful, and finally available in Canada. Head to questrade.com to open and fund an account. Use code TCI and you get $50 to get you started. Do you keep hearing about these all-in-one ETFs lately? Well I have some exciting news. BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15% making them one of the lowest cost options in Canada. That's right more value same smart diversification

All in a single ETF whether you're just starting out or simplifying your portfolio BMO all-in-one ETFs make it easy to invest with confidence Just Zed it and forget it considering ETFs like ZedEQT it and forget it considering ETFs like ZEQT, BMO's all equity ETF or ZGRO, BMO's growth ETF. Now let's get started. You want to go with, I'll give you a back to back here with Aritzia. It's a pretty widely followed name by a lot of our listeners. So it looks like they had a pretty solid quarter based on what the stock did and what you've been telling me. So yeah, it was, it was actually a very solid quarter from Rootsie. I mean, there seems to be a ton of momentum here, especially in the United States. We're not quite at pandemic level same store sales growth. I think like 2021, 2022, they were growing same store sales

at like 25%. I believe it was it's 19.3% right now, but I mean, this is still outstanding. You got revenue up 33% year over year. The bulk of that is in the US. So revenue south of the border grew 45% year over year while Canada grew around 17% earnings doubled on a year over year basis. And you know, a ritzy hasn't really been all that fast of an expander like boutique wise over the last five years or so but they're you know they're kind of going a bit heavy right now in terms of overall expansion so year-over-year boutiques have gone from 119 to 131 so if you look

at their boutiques I don't know if you they do have a KPI on fiscal AI for boutiques you'll kind of see that showing here that the revenue increase Oh, yeah, the US and Canada broken down and yeah, it's definitely you can see it's it may look a little bit lumpy It's just because it's the quarterly here, but looking at some nice increases in terms of yeah revenues for Canada in the US and percentage base and then if you look at the New boutiques or the toll number. Oh, they got the number total number. Yeah, the total number of boutiques It's it's looking good up into the right so they went from in 2019 having in the high 90s and then 131 for the most recent quarter. Yeah, and if you can look to say June of 2024 where they had 119 and obviously

June 25, 131, you can kind of see that it's up and to the right but it's starting to become faster upwards. So they are expanding quite a bit more. I know they've laid out quite a bit of capital in terms of expansion over the last while and that's primarily in the U.S. I don't think they're expanding too much in Canada. Obviously, you know, the U. the US is the much larger and more untapped market for the company. Retail revenue increased by 34% ecommerce by 30%. So they're pretty omnichannel in that base. I mean they have you know revenue from both fronts which is pretty solid. The company rolled out its US-based website. I believe before it only

had a Canadian one and it resulted in a 50% year-over-year increase in US-based traffic. The interesting thing here is the company's Canadian arm has struggled for quite a bit. It's been the US arm that's driven most of the growth and although it still is, Canadian sales being up 17% year-over-year signals, we might start to see a bit of recovery on that end. And I think if the company gets both segments rolling, I mean, it might be pretty tough to stop. They're seeing a big boost in margins. So gross margin expanded 320 basis points. So it's now 47.2% sale SG&A expenses like general administrative expenses as a percent of revenue actually fell as well from 35% to 33.5%. And I believe this is one of the higher gross margins Ritzy has had.

And they had a lot of pressure during the pandemic with inventory and things like that, that caused margins to get hit, but they've seen pretty much a full recovery here. And with the tariff situation somewhat easing, the company scaled back on its potential tariff hit the margin so they expected 400 basis points I believe in fiscal 2026 they now expect only 150 basis points I mean the only the only difficulty here is it can change like on a dime so yeah I was gonna say when was that said prior to July 10th or July 10th onwards? Because obviously Trump has been on a little bit of a roll with his tariff threats effective August 1st, right? Yeah. I mean, I wouldn't put much basis in this. I mean, the thing is that the worst they expected

400 basis points. So I mean, if you just put 400 basis points in your mind, that'll probably be the better way to look at it. They're scaling production back in China so by spring of 2026 they want to reduce exposure to the mid single digits of product that comes from China that's made in China. They issued their fiscal year 26 guidance and next quarter outlook so they expect 19 to 22 percent top line growth for next quarter which should translate into low double digit comparable sales growth. And for the year, they expect 13 to 19% top line growth. They mentioned their EBITDA margin should come in at 15 and a half to 16 and a half. But then they also mentioned that without tariffs, this would be closer to 18%. And

I think a lot of the commentary was quite a bit of, you know, what ifs, which kind of does make sense. I mean, Trump seems to change what he wants to do on a daily basis, but I mean, this is a company like even, you know, 13 to 19% top line growth might not seem all that impressive, but I mean, it's not exactly a hot economy for, you know, a mid tier fashion company and they're still able to grow this much. They're expanding, you know, quite a bit in the United States. So yeah, it's pretty solid quarter, pretty solid last year from Aritzia, especially when we look to other retailers like Nike, Lululemon. I mean, they're struggling so much, but Aritzia definitely, by the looks of it,

doesn't really seem to be feeling it. They're very different companies, like all three of them, but yeah, they're rolling quite well. Yeah, Lululemon, every time I look at it, I'm more and more interested in starting a position again. Mostly because, yes, it's very cheap. It's slowing down a bit, but it's not declining sales or anything. It's still increasing itself. It's not like it's not declining sales or anything. Like it's still increasing itself. It's not a Nike.

Don't get, you know. Yeah. You know, I think a lot of people are almost like thinking that Lululemon is in as bad of a spot as Nike. They're nowhere near close. So I think that's why every time I look at it, I'm like their international side is growing pretty well too. It's getting more and more tempting because it's just trading at about a 15, 16p and they're not giving

it much growth for next year either. So to me it's one that I have on my radar, I've owned before, I love their clothes and I think it's just there's a lot of pessimism for the tariffs and clearly it's also a fashion brand so you never know how things could go sour and that applies to Ritzia as well. But Lululemon, just for the valuation, it's something that for the joint TCI members and subscribers, don't be surprised if I add the Lululemon position in the near future.

Yeah, I mean, you're paying nearly 40X earnings for Ritzia, whereas Lululemon's 15. So I mean, it's by far By far the cheaper company. Yeah. Yeah Aritzia is growing a lot more at this point and I would imagine that you know People might feel that Aritzia's runway is a lot larger as well because they're still I mean despite You know them growing this fast in the US I mean, they don't have a lot of exposure in the US it just started kicking off maybe three four years ago

I believe it makes up 60% of their revenue and when I started, you know covering the company I mean that would have been back in like 2019. I think it was like under 40% so Big US expansion which is probably why you know, those valuations are higher But I mean lululemon if you're looking for a bargain over these two, I mean, Lululemon would be the one by far. Yeah, just if I were to place the risk at this current valuation, I would actually think my view and people can debate me all day one, that's fine. But I feel like Eritrea is a riskier play. I think when people are putting so much growth expectation, that's where I'm like, ooh, like

these are, things are getting a bit frothy and when you have like a really good quality company like Lululemon that people are just not interested in, those are the kind of situation where I think you can get some really good opportunities. I'm not saying that, you know, Lululemon may go down another 50% from here for all we know

but when you see those kind of things that's when I start keeping a close eye on it because that's when some good opportunities can come up. Yeah and I mean Aritzia is one I own I would acknowledge it's pretty expensive right now but I mean there's a lot of momentum there and I mean investors are holding it based off that momentum and we'll see if it continues. I mean there's a large large market for them in the states. Oh yeah and it's not because I say I think it's riskier at this point doesn't mean that you know it may be riskier but things that are risky can still keep going up and up for a while so I think you people have to remember that but But I do think there's a bit more is just because of the sheer valuation. But no, that's a good overview. Let's move on here to a company we talked about maybe a couple quarters ago. I feel like they're

really good at plugging holes when there's not that much that much earnings going on. So Riechel, your hardware. So it's a hardware company. I think they you've dealt with them more in the past, right? They'll sell the different kinds of hardware, but more as a distributor, if I remember correctly. Yeah, like way back in the day when I first graduated, I did cabinet making for a few years and we would deal a lot with them like handles and all that type of stuff. Yeah. Yeah. Yeah, definitely. I know they benefited quite a bit during like COVID during the big housing build out and all that type of stuff. It was pretty, pretty popular time for them.

Yeah, exactly. You can actually see it for their sales. If you're looking at an annual basis here, you can see where revenues like really jumped up during the pandemic, almost doubled. They haven't declined really, they've kind of flatlined since then, increased a little bit. And this most recent quarter actually was not bad better than I thought it would be. So sales were up 6.4% to 512 million. Surprisingly, sales were up 11.7% in the US, but half of that was growth because was organic growth and the rest was due to acquisitions that they made. They mentioned that part of higher sale was due to the tariffs that they actually passed

through the cost to consumers to ensure that it had minimal impacts to margins. So for those saying that tariffs are never passed on to the consumer, I know a lot of Trump supporters will say on to the consumer. I know a lot of Trump supporters will say that in the US. I think the truth is probably in between where I think in most cases there's going to be some of the cause that will be passed on, maybe not all of it. And from what I can tell, their sales are really split almost evenly between Canada and the US. What's really weird about how they present the breakdown between Canada and the US is that they provide their total sell in Canadian dollars, but then when they talk about US specific sell,

they provide that in USD specifically. So you almost have to like convert the currency as you're looking at the financial statements to try and figure out. I mean, I just eyeballed it. My financial statements to try and figure out. I mean, I just eyeballed it. My sense here is that about it's about a 50 50 split between Canada and the US in terms of their sales. Yeah, usually you would always have them kind of go with a constant currency. Yeah, no, it was really weird. It took me by a bit by surprise just because you don't really expect that and you know, like you've looked at probably thousands of financial statements. I mean, I guess if it's like 50-50, if it's 50-50 even, I get, I don't know,

what currency do you report in, I guess, but you'll see a lot of Canadian companies that generate like 70% of their business in the US and they'll report in US dollars. Yeah, exactly. Or they'll report in Canadian dollars, but then they'll provide some currency adjusted, increase and stuff.

That's more common whereas just having that US and Canadian reporting is just a bit weird. So during the quarter they did two acquisition that brings a total acquisition for 2025 to 6 and although they tried to not impact margins with higher prices like Like I just mentioned, gross and operating margins were still down 50 and 40 basis point respectively. Earnings per share were down 2% and over the last month they generated 109 million in free cash flow, which is pretty much in line in general. I mean, obviously it goes up and down. Free cash flow is never going to be exactly constant, but overall it's actually been relatively stable. If you take out like two kind of weird years, 2022 and 2023. So 22 was negative 54 million in Freecastle and 2023 was 234 million in free cash flow, but overall they're typically since 2019

within a range of like 19 to 110 million in free cash flow. So there are worse businesses than that, especially considering that there's been some ups and downs in the construction industry during that time and they fared pretty well. So they seem to be managing things pretty well at first glance, not taking too much risk, but they do have a strategy of acquisitions and overall for construction related in the business like relatively stable. Yeah, I mean I would imagine they fluctuate quite a bit on housing starts, but again like I don't really know this company all that well.

I just know like back when I was very young, we used to go to them for, you know, a lot of cabinet handles and things like that. So I would imagine housing starts are a big thing. That's probably why they absolutely boomed in, you know, 2021, 2022. But it's been a company that's kind of struggled to, you know, put together anything long, long term, at least over the last 10 years but um yeah it's probably going to be just a very slow grower but it's still going to be dependent to the housing cycle but then again they probably do a decent chunk of business when a lot of people are renovating right doing those big renovations and whichever companies

are doing the actual renovations probably deal directly with Richard your hardware. Yeah and it's not a very good environment for that either, especially south of the border. I mean a lot of people use HELOCs and stuff like that to fund renovations and HELOCs at least in you know in the US are not cheap right now. No so that's it for this one. So we'll move on here to another Canadian company MTY food group that reported when did they report? They reported July 11th. I think it was pretty recently. Okay, so yeah, they're still struggling quite a bit I believe we actually covered this a while back. Yeah, it was probably like a year ago So and I kind of you know discussed how its exposure to malls and shopping centers

might be having an impact. I actually was kind of wrong in that regard. Like I hadn't looked at empty wine quite a while, but they've actually like done a very good job of actually reducing exposure to that area. So not too long ago, food courts and stuff like that made up nearly half its sales. And it looks like it's around 15 percent now. This is a Canadian ticker, but the bulk of its revenue is in the United States. I think it's around 15% now. This is a Canadian ticker but the bulk of its revenue is in the United States. I think it's just under 60%. 35% is focused in Canada and then

the rest being international. Revenue was effectively flat year over year. EBITDA declined by 5% and free cash flow fell by low single digits as well. Earnings were down by around 6.5% and same store sales declined by 3.8% in the United States, 2.9% internationally and they actually increased in Canada by 1.4%. So the company has 7046 locations which is down from the 7080 it had last year. This company actually has a ton of brands like I'm trying to look it up right now. They have a like there's dozens of actually like probably 50 of them. I mean we're like things like Taco Time. I think they own like Thai Express and things like that. A lot of the stuff you would see kind of in you know those food courts. Yeah. Jugo juice things like that. They have a We have those are not usually in food court. So they're usually standalone but

Mike's is pretty popular especially on the Quebec side here. I'm not sure if they're anywhere else. Mr. Sub. Yeah muffins I've seen scores pretty popular too as standalone But the sukiyaki, I think that's a food court one But yeah, I mean they people can just go on their website Like they have so many brands. They have Van Houtte too. So I did not know they owned that one. Might be the worst coffee Yeah, like so Thai Express you're right. It's in there too. So I don't know they must have yeah Just looking at it like 40 ish brands. Yeah. Yeah, and that's probably why like it's a relatively small company So some people might think well while they have you know, seven thousand plus stores. It's because they own like

50 different franchises maybe but yeah, as I mentioned like they're declining so they had seven thousand eighty last year to seven thousand forty six and I mean this company is kind of interesting me because I wonder if it's an element of relief in terms of interest rates, I mean, compared to Canada, compared to the US. I mean, same store sales in Canada were up by 1.4% and the rest of it kind of down. And they did kind of mention it's attributable just to the macro conditions compared from Canada to the United States. And I mean, it says there's pretty much weakness across every single banner it has in the United States. There's lower traffic.

They said combined with higher food prices, labor costs, it's putting a lot of pressure on them. And they kind of said they expect store closures to remain in the similar range for the back half of 2025. I mean, to me, this really isn't a good sign with franchisees like this. You don't really wanna see closures outnumbering additions. You're just kind of spinning your tires at that point.

I mean, if you look to a company like, I don't know, just off the top of my head, like QSR, like Popeyes, Burger King, Tim Hortons. I mean, I think Burger King is struggling, but I think Popeyes and Tim Hortons are doing quite well. Like they're still increasing that store count Firehouse subs as well. So the decline is, is a bit concerning and they, the company is trading at like rock bottom valuations.

They're buying back a ton of shares as a result pays a pretty reasonable dividend 3% and it only makes up around 10% of the free cash flows. But you know, I'm kind of starting to wonder if it's value trap territory here. So it's trading at 5.3 X it's trailing 12 month free cashflow. I mean, but when you consider the flat revenue, the declining store counts, the pressures in terms of food and labor, I not really all that surprised. Maybe policy rates start to decline in the U.S. and we see a few Americans head back to quick service restaurants. Historically,

over the last five or 10 years, this company has traded at nearly 10x free cash flow and now it's nearly half of that, but the business isn't exactly doing all that well either. So I think if you're looking at this one it might be worth you know taking a deep look. Yeah it's the kind of play you definitely want to I mean it could be could be a good turnaround play. Yeah. I haven't done enough research but at the end of the day you have to really be careful when you have companies that are a bit struggling like that. You have to be really sure of your thesis and do a lot of homework on it because if you don't then You're basically shooting in the dark. You may get lucky. You may get unlucky. But yes, I mean

It's hard to say I mean, there's a lot of things to like about it But like you is just seems like it's stagnating a little bit. Yeah. Yeah, and I mean I if I do look at their entire brand of franchises, I don't think I've ate at one of them in the last, like, well, I can't even remember really. I mean, I haven't ate at Taco Time in a very, very long time. And that's probably the only one that's around here.

Maybe Thai Express, but yeah, I don't know. They don't really like, when you think of like QSR, like the ticker, not quick service restaurant, but like restaurant brands. I mean, Tim Hortons, Popeyes, Burger King. I mean, they're very prominent brands, but like MTY seems to own like a lot tinier ones. But yeah, it's, I don't know. I haven't looked into it enough to see. But I mean, if the USN turns around, I mean, 60% of the revenue in the US, it could see a turnaround.

Yeah, I mean, the one thing it may have for working for them compared to a bigger player like QSR is as a market cap below 1 billion. So it's gonna fly under the radar of a lot of investment firms, investors in general, like large like family offices, even pension plans, stuff like that. It's just too small to enter the conversation. So that's where it may be attractive compared to QSR, just because it's such a small company that a lot of investors just cannot invest in it

because it's too small. And when I say investor, I'm talking more institutional investors, of course. Yep, it's possible. I mean, they obviously think the stock is cheap. They bought back quite a bit of shares over the last few years, but again, that's never a guarantee.

Yeah, it would not be the first time that a company doesn't do buybacks properly. Yeah. Summer always gets extra busy. Weekends at the lake, trips out to Canada's east coast, vacations with the family, chasing a bit of sunshine somewhere new. Every time I'm away, and probably you as well,

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or ZGRO, BMO's growth ETF. Okay, no, that's good. So we'll finish off here with Delta Airlines. So the big US carrier, I'm sure most people are familiar with them. They're usually one of the first ones to report in the US and I think JP Morgan just reported today. So it's really starting to kick off. Delta, it was't the best quarter from the headlines. I saw it seemed like it was better than

Then it seemed but then I started looking even the press release was really interesting So I'll kind of elaborate a little bit on that. So operating revenues were flat for the quarter They're actually down 10 million but at the size of revenue that Delta has in the billion, tens of billions of dollars, I mean, it's 10 million is, let's just say it's flat operating revenues includes passenger revenues, cargo, and there's also this other revenue. And that's really important because the other will include things like the rewards program, additional fees and other things like that. So basically stuff that doesn't fall

under the two categories. And believe it or not, it's actually the third largest revenue category, sorry, the second largest after the passenger revenue. And then you have the other section, and then you have the cargo section. But why I'm talking about this is because I texted you about it. I even tweeted I just find it funny how companies or something funny or sometimes a bit misleading,

they'll use the press release to make things sound better than they are, or borderline mislead investor. And this is really borderline misleading investor because in their press release, they said that revenue hit a record high, which is true if you're focusing solely on passenger plus cargo revenue, but you don't look at the other revenue that they have. And even the passenger plus cargo, it was a whopping 0.28% higher. So it's because clearly it wouldn't have been good for them to put like revenues increased

0.28% or 0.3% which most investors would have seen that as just being flat. So instead in their press release they put record revenue which is not wrong if you massage it correctly. But at the end of the day I do have issue with that because I find it they're trying to sell it's clear that they're trying to sell the the performance to investor when it's really not that good but companies are famous for doing that not all of them do it but some do use that bend the truth a little bit on their press release.

Well, yeah, I remember, I don't know if you remember BCE when they cut their guidance midway through the year and then at the end of the year they issued their quarterly and said that they hit their annual guidance, like their cut guidance. So they cut it and then they hit it and then they talked about how they hit their guidance. I mean, like obviously these companies are going to release reports that kind of maintain a bullish attitude. So if they hit record revenue, I'm sure they're going to publish that they hit record revenue. But I mean, obviously it's your job as an investor to dig into it because again, they're going to be... These earnings releases, they don't want people to sell, they want people to be bullish. So they're gonna be, you know, these earnings releases, they don't want people to sell,

they want people to be bullish, so they're gonna have bullish headlines, bullish numbers, and yeah, it's your job to do the digging. Yeah, yeah, exactly, and just wanted to highlight that because I think a lot of people will focus a bit too much on the press release and not look at the numbers, and that's why it's so important to look at the numbers. Earnings per share was up 63% for the quarter. On the positive side, they have continued paying down debt pretty aggressively. Like I will say that I'm not going to be critical of everything. Total debt has definitely been trending in the right direction. I'm just showing this here for Joint TCI. So it really peaked during the pandemic, no surprise at all. Airlines were

really struggling. They got, I can't remember for Delta, I assume they were extended some kind of loan from the US government. I mean, most airlines were bailed out in one form or fashion from by their governments. But yeah, the debt actually reached at 36.6 billion back during the pandemic, and it's gone down significantly since. So the most recent quarter is actually 22 billion. So they've reduced that by about 40 billion and continued to do so.

So definitely something positive here for Delta. On the call, they said that demand is similar to that of last year. They expect business and consumer confidence to improve in the second half of this year with continued progress on the trade negotiation. But again, it's kind of funny, I listened to the call and then I'm like, when was this call recorded? Because clearly it was recorded before Trump started making those those Tera Threats

Yeah, Tera Threats left right and center. I think it was recorded one day before so it's just funny How quickly things and sentiment could change whether it affects Things for Delta for the second half of this year, we'll have to see. I mean, I think a lot of people at this point are just like, okay, like they, I think he's flip-flopped on tariffs so much or kind of changes mine or reduced them or whatnot that I don't think that people don't take him seriously, but people more Maybe I'm just speaking for myself, but now I'm more in the wait and see approach, which yeah. Well, I think they take him less seriously now,

whereas when he first did it, it was kind of a big thing. You saw the markets. Well, what are the markets? The markets, yeah. They bombed. But now it's like, I mean, I think people just shrug it off. Yeah. I don't know.

I guess they're just kind of moving up and down a bit, but nothing too wild one way or another. Yeah. Yeah. Yeah. I mean, they've done like in terms of the debt, I mean, there's been a lot of airlines who've actually like made it a priority to like, I think even Air Canada has nailed down almost half of their debt that they accumulated over the pandemic.

So I mean, at least they're kind of getting their stuff in order in this regard. I mean, Delta's well, they're not back to pre pandemic, but I would imagine they'll get back to it pretty soon. It's okay. They'll find airlines have a way to like shoot themselves in the foot sooner or later. Like they have a very bad track record historically as an industry to make wise capital allocation decisions. There's a reason why a lot of airlines took on a lot of debt and had to be bailed out by governments is because they, instead of paying down the debt they had previously

and creating a cash cushion, they just decided to buy back stock when it was extremely high. And then they were kind of screwed when the pandemic happened. Of course, it's a Black Swan event, I get it. But at the end of the day, this is not the first time that airlines are in trouble like this.

So I always be the last. It won't be the last either. Exactly. I won't go through all the metrics specifically for airlines, but I did take a couple of them out here that are really interesting. So total revenue per available seat mile. So this is essentially the seats that are available for paying passenger and the revenue that they're generating per seat. So that one has actually been up and

down a little bit but what we're seeing, so if we go back to the quarter of last year, it's actually down a little bit and that is the trend that you're seeing. So if we go back to the quarter of last year, it's actually down a little bit. And that is the trend that you're seeing. So it was way, way up in 2022, for obvious reason, people were locked down for a year, better part of a year and a half, two years because of the pandemic. And then everyone wanted to travel because they just couldn't for two years. And then demand was through the roof. So clearly a lot of demand means more pricing power for airlines and if you look at that metric clearly the pricing power is going down. It's not going straight down but it is definitely a pattern that you're seeing it going more

down and down and it does go up and down obviously per quarter because there are seasons where there's more demand for airlines the summer season being one of those seasons. And then if you look at the other one is the cost per available seat miles. So for those available seats for paying passenger, what is their cost to essentially operate those seats? And that one has been, again, kind of stable, but not not trending in the right direction. So it is, you you know it it's going up and down we'll have to see so it's a little bit bit better I would say

this quarter than last quarter last year but it's also kind of hard to see that it's trending in the best direction it's kind of flatlining but that is something I would keep an eye on for not only Delta, but any kind of airlines. Those are two of the most important metrics in my opinion, because essentially it's what can you get for those seats? And then how much do those key seat costs you for operating them? So those are two of the metric. The cost is definitely trending in the better direction, although it's pretty flat, like I said, but the actual amount they can get per seat is trending the wrong direction. Yeah, like if you look back to 2021, you'll notice they're making way more money per seat.

But then if you look to the cost per seat, it's also skyrocketed. I mean, I've noticed like flights when I booked my flight for the Toronto event, like it was cheap. I think it was only like $300 for round trip to Toronto which is I mean that's like an absolute bare-bones fare where they charge you like a dollar's just to put a carry-on on yeah they put you they put you in the carry-on bin it's like that's pretty close yeah I mean I think that's a business model that a lot of airlines are going now though.

Like you'll be nickel and dime for everything outside of the literal seat you get unless you want to pay a premium. But I'm not a very big guy so I can tuck into those seats pretty easily. Yeah, if you're taller, I mean it does get a bit more difficult for sure. Like for me, traveling to Calgary, I'm not the tallest, but I'm 5'11", I can just imagine guys and girls that are in their like six feet plus. Literally like when you went to the washroom,

you had like, I had trouble like just kind of sitting and standing in that washroom, like my neck was bent, like I could not, so I was actually scared that there'd be turbulence and thenroom, like my neck was bent. Like I could not, I was actually scared that there'd be turbulence and then I'd hit my neck on the top of the ceiling, like that's how tight it was. But no, I agree with you, I think a lot of them are going bare bones. And in terms of guidance, just to finish on this,

they expect earnings to be flat for the full year. Probably not a bad thing, given the macro environment that's really rapidly changing. Earnings per share will be down between 9 and 23% for the full year. That's the range of their guidance. Again, they've been guiding for this, so not a huge surprise.

On the bright side, they continue returning money to shareholder. They announced a 25% dividend increase. So for those who enjoy dividends, that's a good news. But again, it's still about half of what it was even with that increase compared to pre-pandemic. So it's still some ways to go. And let's just say lack of better words,

bag holders for Delta Airlines from pre-pandemic, if they were in it for the dividend, there's still a long ways to go before getting back to those levels. Yeah, I think they cut it by more than 75%. I mean, you had to cut it though. Yeah, they had to. This was nothing really.

No, it was prudent. Yeah, you could not cut it during that time, but yeah, I mean, airlines, they're tough businesses to own. I think it even went to zero according to this. Yeah. Yeah. Oh, yeah. Oh, yeah, they just completely eliminated Yeah, they didn't even cut it. They just eliminated it which I mean they kind of had to but yeah Yeah, I mean, I don't know I I used to watch airlines, but I they're're tough businesses, don't tough business to make money. I mean, you've seen like the quality of air travel just declined to the point where it's just painful.

And I think it's just going to continue to, for them to try and, you know, kind of eke out some, some profits, but. Yeah. That's why for the Toronto event, I, I looked at airlines, I'd aired like air tickets and it's crazy how expensive it is just on a short distance. It was more expensive for me from Ottawa to Toronto than it was for you from Calgary to Toronto.

So it's kind of interesting. So I just decided, you know what? Just going to take the train, I'll be able to do some work while I'm on the train and it was 200 bucks less in total. And it's a pretty good experience, way easier than going to the airport too. So you get there like 15 minutes in advance and you yeah, it just feels like you have less hoops, you have one, you can bring it back back, you have like luggage or you can even bring two like carry-ons if you want. Like there's not really that many restriction on the amount of luggage you have.

So when it's possible, it's kind of a no-brainer. Sure, it takes a bit more time, but just the fact that I can work and do be productive while I'm doing it, no-brainer for me. Yeah, I hate flying. Just I don't mind airplanes, but just the entire process of flying is painful. But yeah, I mean it's It's gonna be a pretty rough go for the airlines. I think cuz I think demand is gonna continue to be lower I don't know how much Delta would be impacted by you know, the lack of Canadian Travelers, I mean, I know WestJet hooks up with Delta quite a bit when you're going to the States

But I would imagine that's that's at play as well Yeah, probably. I mean I'm trying to think I'm pretty sure they fly a decent amount in Canada to Delta and United right? I feel like I've seen those decent yeah. I've booked with WestJet before and they've I've flown on a Delta plane even booking with WestJet so that probably has it's probably having an impact the lack of of you know snowbirds heading down south. Yeah yeah exactly well I think it's a good place to wrap it up a bit of a shorter-ish episode but thankfully earnings are starting again so more stuff to talk about we had a couple weeks hiatus where we just recorded some episodes in advance so we didn't have to record while we were doing the Calgary event, which was great by the way, going to

the Stampede. But I didn't see the rodeo. I did get a cowboy hat, but I didn't see the rodeo. So I think if we do that again next year, that's on my to-do list. I'd like to see like an event or two from the rodeo because it looks absolutely insane but I still want to see it. It is. Yeah, we went down to the grounds and I was like a hundred dollars in like probably ten minutes after I walked in the door.

Yeah, that sounds about right. Yeah. Yeah, I was joking that because we played a little bit of poker because Dan and I like to play some poker and I was joking with a person on the table that seemed to know a bit about rodeos. I'm like, wow, like there must not be a lot of guys in the 30s first of all and second of all, I would like them to show the list of injuries that I think the horse, the wild horse right? Sorry if I'm butchering all of this. I do not know this stuff well,

but the ones that ride the wild horses or bulls, the list of injuries that they must have through a career, like it must be completely insane, yeah. Yeah, you gotta be a big adrenaline junkie to hop on a bull for a living. And young. Yeah, because man, that just catches up to you when you're in 30s and 40s. Enough rambling.

Thanks again to our sponsors for the Calgary event, everyone that showed up. It was a great event. Looking forward. Hopefully we'll do it again next year. But thank you everyone that was there. It was fantastic and it was great seeing you in person there. Yeah. We'll see again next year. Thank you everyone that was there. It was fantastic and it was great seeing you in person. Yeah, we'll see you next time. Thanks for listening. The Canadian Investor podcast should not be construed as investment or financial advice.

The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.